Thursday, March 10, 2011

Gimme your money or else! Its tax time

Did I ever mention how much I hated doing income tax? I believe I did, last year. Nothing has changed. It might not be so bad if I felt I was getting something for the money (I'm kidding). The fact is, I suspect much of my tax money goes to transfer payments, either to another province or directly to some other people. I have no idea where all the money goes, and I think I pay attention to things like that. Imagine the plight of most of my countrymen who generally don't give a damn, they are being robbed blind. I wish someone who knows where the money goes would itemize it for me, not that it makes a difference, I know it isn't being spent well.My municipal-regional real-estate tax gets me garbage collection, road maintenance, sewage and snow removal, police, schools, transit and other tangible services. I get all of those services for about one-fifth of my family's income tax payout. While I have little choice in who or how delivers these services, they are generally adequate, but with lots of room for improvement.
Lets see, my federal-provincial income tax gets me health care (it must be a big chunk of that money), a smallish armed forces (its wonderful to live next to America), a judiciary, a border control and an enormous bureaucracy to dole out the transfers etcetera.
To further irritate me, I spend hours trying to dodge and finagle my way out of paying too much tax by filling out tax forms each year on my computer. Last year I mentioned the idea of a flat tax, its still a great idea, and William Hanley in the Financial Post thinks so too. He suggests 25%, I'd start lower and dump some of the gravy, a term that has become popular in these parts.
Of course an income tax is punitive, and always brings to mind the chant "from each according to his ability, to each according to his need." Yes, that phrase popularized by that guy, should make everyone think about the morality of income tax. Its immoral, legalized theft, and it penalizes effort, never a good idea.
Consumer taxes are better, and less punitive. We had a provincial and a federal sales tax, PST and GST, now we have the harmonized sales tax HST. I don't really like it either, but at least it is avoidable in some ways.
A big problem with those taxes are that businesses become government tax collectors. One of my colleagues, who runs a business, actually snubs his nose at government, and refuses to collect sales tax. Watch and listen to this interview of a very brave gentleman.

A flat tax makes no sense. A part-time earner that makes $15,000 is expected to pay $3750 whereas a $100,000 earner pays $25,000? The latter cannot afford to live. Even someone that makes $30,000 barely earns enough to live on their own.

Back in the fifties, income taxes were as high as 90+% in the US on the highest incomes (I believe it was $250,000). In other words, there was no incentive to earn money after $250,000 - effectively an income cap.

What did this mean? The wealthiest people were funding the great investment in infrastructure and higher living standards. The middle class earned a higher share of all income and a healthy middle class has been credited with creating stable societies.

The Libertarian model of unlimited income and that individuals deserve ALL of the money have earned neglects to recognize that individuals who earn excessively high incomes have not worked harder than those who do not. The hardest working individuals in the world tend to be the lowest paid (mostly women). High income earners succeeded mostly on the good fortune of having a particular talent or idea that is popular in their lifetime - in a sense they are the lottery winners. To assume they are self-made is a myth. Even Oprah or the Koch brothers owe their good fortune to others.

Essentially, Libertarian economics is a great casino where only a select few get to win monstrously in their lifetimes. And, they even get the chance to buy all the casinos, rig the system to reduce the big payouts (thereby preventing winners big enough to overthrow them) and to pass this good fortune down a path of nepotism.

I'm always amused to see Libertarians envisioning Libya and Egypt becoming a model of Libertarian economics when both countries WERE espousing many Libertarian values - let the dictator get as rich as they can with no obligation of taxation to provide income, jobs and a decent standard of living to those peons who just don't know how to work as hard as the leader.

First to Sebastian, I didn't say I liked a sales tax, I just pointed out that it is less punitive to effort than income tax. In Canada if ones income falls below a certain threshold as indicated by your previous income tax filing, our federal government sends rebate cheques to those people to help defray "punish(ing) the poor disproportionately." Of course this adds to the enormous bureaucracy. The idea of a flat tax is championed by one of Canada's leading think tanks as you can check here: http://www.fraserinstitute.org/publicationdisplay.aspx?id=16955&terms=Best+taxhttp://www.fraserinstitute.org/publicationdisplay.aspx?id=15920&terms=flat+taxhttp://www.fraserinstitute.org/publicationdisplay.aspx?id=15868&terms=flat+taxNow to my humanist friend, let me point you to something called "Hauser's Law" (http://www.cato-at-liberty.org/will-hausers-law-protect-us-from-revenue-hungry-politicians/) which I wrote about some time ago, effectively limits how much tax can be extracted from individuals (Americans in this case as in your example).On the idea of hard work and pay, would you say that a ditch-digger works hard? I would, but I would not equate the effort of a ditch-diggerwith a brain surgeon who might work only a few hours a day yet earn an enormous salary. A free market rewards those individuals who excel at various activities that our society values. There is little value to the very hard work of a ditch digger because just about anyone can do it. But if you can swing a baseball bat and hit a home run against a major league pitcher, then for what ever reason people will pay to watch that as silly as it sounds.I don't have the time or patience to discuss fundamental free market economics here. There are plenty of books out there that do a better job than I could. But that is the issue here - and it's a moral issue. Are people entitled to the fruits of their labour? Or, should people be forced to share their wealth at the point of a gun by an oppressive state or whomever? We will never agree until we can agree that coercion must be removed from interactions, period.As for you points on Libya and Egypt, that is just bogus - what libertarians values are modelled?

There is no simple answer to this question. If the result of my labour makes me very rich to the detriment of others, than no. Besides, most wealthy people do not make their money through their labour - they make it on the backs of other people's labour.

Now, you could say that a labourer should hang their own shingle, and many do. However, that takes capital to get started - sometimes a lot. Therefore, it is the wealthy capitalist who can open the store and thereby controls the jobs. Unhindered earnings means that more capitalists own more and more jobs. That's what I mean by Libya and Egypt. Inevitably a small group of extremely wealthy people own all the jobs and it becomes like a dictatorship - there's no longer any liberty.

I certainly agree that a surgeon should be highly valued but why is monetary compensation the only metric by which to reward their skills? Are you not aware of the research that shows that offering people higher sums of money actually decreases the quality of their work? I suspect that many highly paid doctors would take a pay cut if they were given other options like having more surgeons available in their area or spent less time doing paperwork.

An actor who makes $50 million in a year contributes almost nothing to society at large but a surgeon who earns $500 thousand, will have helped hundreds of people (or more) in their first of many years of practice. Worse, the actor can buy the surgeon or buy the surgeon's place of employment (a private hospital) and earn even more money off the work of the surgeon - all with no obligation to add value to society. Sure, they've provided the hospital, but so can the public system - and its owned by all.

Let me disagree with the last paragraph first. I love movies, to say that an actor contributes nothing to society insults ALL forms of art. Did Shakespeare or Michelangelo or George Carlin or John Lennon or Michael Jackson or Robin Williams or Meryl Streep contribute nothing to society? I'm sure that was not their goal. Modern actors and artists have a huge market to draw from - hence their wealth. Shakespeare and Michelangelo were likely not that wealthy only because the market was small, but imagine the residuals for those two! My $10 at a movie and the $10 of millions of others have made many actors today wealthy, and thats how we assign value to our lives. Bain surgeons have a smaller market to draw from and there are fewer of them (with lots of gov't interference here and in the US) - so they are less well of then some actors.The idea of "ownership by all" is Marx's (see above), and if you believe that is the best way to do things, then we should collectivize everything. Why not? It worked in the Soviet Union, in Cuba (still working), in North Korea (still working), in Communist China - oops they adopted large amounts of capitalism - look at them now (but it is crony capitalism and will fail soon enough!If you scroll up this page to Libertarian Links on the right, there is my answer to the use of force in human relations.As for the "zero-sum-game" you seem to think exists in the fruits of labour, let me point you to a series of videos that might change your mind: http://www.learnliberty.org/content/trade-made-win-part-1-wealth-creationThat is one of a series, the others at http://www.learnliberty.org/category/topics/economicsare also very good.

Last week, Larry Kummer posted a very thoughtful article here on WUWT: A
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Republic of Canada

The short-lived Republic of Canada is a little-known chapter in Canadian history. From 1837 to 1838 William Lyon Mackenzie and a small group of supporters occupied Navy Island in the Niagara River. The rebels were agitating for a government that was both responsible and representative. Although their struggle was not successful, eventually these ideals came to be represented in the government of Upper Canada and, later, the country of Canada we now know. Liberty was such an important value to this little group that they put the word on the flag, making this short, but important, episode of Canadian history something worth remembering.